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Mohd. Khata Bin Jabor email: [email protected] slide 1
SPE3002/SPK5002COMMERCE AND
ENTREPRENEURSHIP
WEEK 1225 SEPTEMBER - 31 OCTOBER 2006
Mohd. Khata Bin Jabor email: [email protected] slide 3
LEARNING OUTLINEOpportunity Recognition? Ideas vs. ConceptsGlobal TrendsDifferentiating OpportunitiesHarvest Issues
Continue..
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LEARNING OUTLINEGoals for EntrepreneursConcept of FeasibilitySuccess CriteriaRecipe for SuccessFactors Venture Failures
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Remember what is the definition of ENTREPRENEURSHIP
It is the process of recognizing, seizing, pursuing and
exploiting opportunities without regard to the resources
you currently control.
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OPPORTUNITY RECOGNITIONWhat is an opportunity?How do you recognize opportunities?How do you screen opportunitiesHow are concepts different from ideas?What is a business concept?Is the business concept worthwhile?How do you define a superior opportunity and concept?
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OPPORTUNITY RECOGNITION
An opportunity is not an idea nor is it a
business concept.
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An Opportunity is External
It is not a solution hunting for a problemIt is in the environmentIt is a need to be fulfilledIt is a want to be addressedIt is a fear to be relievedIt is time limited
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Ideas vs ConceptsIdeas are often seeing a need, want or fear and saying, “Lets meet that”Ideas are sometimes a technology hunting for an application or “opportunity”Concepts are when you put a technology together with the customer and understand the business an revenue models that lead to sales.
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The Concept
Resources NeededMoney Made
Distribution & Marketing
Products &Services
Customers Groups
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ON IDEAS
If a man makes a better mousetrap than his neighbor, though he builds his house in the woods, the world will make a beaten path to his door.
Ralph Waldo Emerson
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ON CONCEPTSThe manufacturer who waits for the world to beat a path to his door is a
great optimist. But the manufacturer who shows this
“mousetrap” (and its value) to the world, keeps the smoke coming out
his chimney.O.B. Winters
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Entrepreneur’s Bet
Programmer’s adageBoy Scout MottoBe risk averse. Don’t stretch too much, too fastKnow your concept
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Concepts are builtusing ideasentrepreneurial creativityin real time, take time and address real problems.
DEFINITIONS OF OPPORTUNITY
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Good ideas are not always good opportunities nor viable concepts.Opportunities yield measurable net benefits to the entrepreneur and to society.
DEFINITIONS OF OPPORTUNITY
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Concepts are builtusing ideasentrepreneurial creativityin real time, take time and address real problems.
DEFINITIONS OF OPPORTUNITY
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Opportunities are also situationalThe Window of Opportunity
Opportunities take form in real world conditions
Changing conditionsLeads and lagsKnowledge gapsChaos and/or confusionInconsistenciesUncertainties
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THE WINDOW OF OPPORTUNITY
Market Size(RevenuePotential)
Time (Years)
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Some Global TrendsSocialPoliticalEconomicTechnologicalDemographicGlobalLocal
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FIRM
Competition
SuppliersCustomers
SubstitutesSocial
Political/LegalTechnological
Global
DemographicsIndustry
EnvironmentEconomic
Macro-Environment
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EconomicConditions
DemographicTrends
Socio-CulturalTrends
Political/LegalTechnological
GNP Trends PopulationGrowth
LifestyleChanges
Legislation
Govt. Spending Age Distribution FamilyFormations
Welfare
Interest Rates PopulationShifts
Health Trends Housing
UnemploymentLevels
Immigration EnvironmentalConcerns
Agriculture
Income Levels Birth Rates Education
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Heuristic Model forOpportunity Identification
etc.
MarketDemands
EnvironmentalForces
CulturalForces
PersonalExperiences
Technology
SocialForces
PersonalAttributes
Elaborate
EvaluateEureka! Go ahead orQuit
VISION
PREVISION
Modify
DEVELOPMENT DECISION
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Alertness Model
Persondoes nothave alertness
Personhas alertness
Maximization
OptimizationAssessment
OpportunityFunding
NoOpportunityFunding
PERSON SITUATIONCOGNITIVEBEHAVIOR
OUTCOME
No AbilityNo Gain
AbilityNo Gain
No AbilityGain
AbilityGain
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Person-Place FrameworkRight Person
Right Situation
Assessment BreakMeans-EndsFrame
CreateNewFrame
Perceptionof ViableOpportunity
(has entre-preneurialalertness)
(person hasability to grasp and has potentialfor gain)
1) Perceptual- attend to new info.- put self in position
to get exposure to new info, etc.
- veridical perception2) Reasoning- tolerance of
ambiguity- interpretation of
information- presented frame
only or best way- why these ends- why these means
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IDEAS VS CONCEPTS
Avoid spending too much time and money on “Trombone oil or Space Shuttle docking ideas”
You may turn out the best product in the world, but the entire world needs only about a pint a year or five in a generation. These are great ideas, but poor business opportunities or concepts.
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ANSWERIs this really an adequate business opportunity and concept?Is this one I/we want to pursue?What resources are required to exploit it?How do I/we acquire them?How do I/we manage the operation?How and when do I/we harvest?
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DIFFERENTIATING OPPORTUNITIES
Revenue Potential
Concepts
Small Big
Obvious
Not Obvious
Most small businesses
Highlycompetitive
Black holesHigh
potentialventures
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Market Realities Impact Opportunities
Supply
Demand
$/UnitPrice Cost
Quantity/Time Period
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MARKET & OPERATIONAL ISSUES
Size, market share, growth rate, and penetration rateThe 4 P’s and Position
The CustomerGross Margin
Sustainable ?The Competition
Cost ArchitectureThe OperationsThe Value Chain
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Fixed and Variable Costs, Contribution Margins, Prices
Production, marketing, distributionBarriers, Porter’s 5 forces, EgoLegal considerations (structure, tax, etc.)Talent or Social Capital
SUSTAINABLE ADVANTAGE VERSUS INNOVATION
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Profitability Positive Cash flow ROI on Required I Investor Demands/Expectations Value at exit Life style issues
Personal wantsFamily issues
HARVEST ISSUES
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OrganizationOrganization
Opportunities
Existing
NewNew
OrganizatioOrganizationn
Changing Opportunities Mean Changing/Shifting the Organization
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Team, Founder(s) Fit with Opportunity Track Record Gaps in Capabilities & Competencies Values and Ethics Personal Goals and Objectives
MANAGEMENT TEAM ISSUES
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Goals for EntrepreneursFinancialSocialPersonalPoliticalShift with Life Cycle
Of FirmOf Entrepreneur
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Technology Service Team, talent, fit Channels of distribution and marketing Pricing Opportunistic, adaptive
DIFFERENTIATION ISSUES
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The Myth of First to Market
It is really the first to market acceptance in a specific market niche.
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Principles of Innovative Opportunity Seeking
Systematically analyze all sourcesGo out: look, ask, & listenKeep it simple, stay focusedStart small (specific) BUTAim for leadershipBe market focused, be market driven
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More Principles of Innovative Opportunity Seeking
Don’t:Be cleverDo too much at onceInnovate for the future
Focus on opportunity, not risk
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In Summary then what have I been trying to say to you for the ninety minutes or so?
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CONCEPT of FEASIBILITYCOMPELLING INTERESTCUSTOMER OPPORTUNITIESCUSTOMERSVENTURE CONCEPTSFINANCIAL RESOURCESENTREPRENEURIAL TEAMVENTURE EVALUATION
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COMPELLING INTEREST
“Choose a job you love, and you will never have
to work a day in your life.”
Confucius
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CUSTOMER OPPORTUNITIES
“The secret of life is to be ready for the
opportunity when it comes.”
Benjamin Disraeli
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CUSTOMERS
“I cannot give you the formula for success, but I
can give you the formula for failure...which is: try to
please everyone.”
Herbert Bayard Swope
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VENTURE CONCEPTS
"Vision is the art of seeing things invisible.”
Jonathan Swift
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FINANCIAL RESOURCES
"Happiness is a positive cash flow.”
Fred Adler
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ENTREPRENEURIAL ASSESSMENT
"The true entrepreneur acknowledges that he or
she cannot succeed alone."
Dr. An Wang
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VENTURE EVALUATION
"Confidence is what you feel before you comprehend
the situation."
Old Proverb
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SUCCESS
"Success, as I see it, is a result, not a goal."
Gustavae Flaubert
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SUCCESS CRITERIAIT IS NOT ONLY MONEY!!!
GrowthProfitabilityTechnological InnovationMarket ImpactInstitutionalization of Success
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Final Words About Opportunities
I was seldom able to see an opportunity
until it ceased to be one.Mark Twain
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AWARENESS OF OPPORTUNITY
Divergent or imaginative thinkers tend to note opportunities or problems. Curiosity and attention are essential for noticing what’s wrong or what is an opportunity.
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Think of these issues when you we discuss issues ...
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Recipe for SuccessGreat Value Proposition
Technically Feasible Product
Protectable Intellectual Property
Sustainable Competitive Advantage
Large Potential Market
Proven Business Model
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Causes of New Venture Failure
MarketSmall size of the potential marketNo clear product differentiationMisunderstood customer needsLack of channel supportCompetitive response
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Causes of New Venture FailureTiming
Too late in the market – me tooToo early in the market – missionary marketing
FinanceLow Return On Investment (ROI)
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Causes of New Venture FailureTechnology
Right featuresPerformance
OrganizationalPromoter conflicts -- different aspirationsPoor fit between products and organization (DNA)